south china morning post : asian investors take gamble on las vegas real estate recovery

P8 Wednesday, October 31, 2012

SPECIAL REPORT: PROPERTY MATTERS

Astute Asian investorsare taking a biggamble, putting theirmoney and faith inone of the most dire

real estate markets in America,one billed as the entertainmentcapital of the world which hasnot been at all enjoyable forinvestors since 2008.

The lights went out on thehousing market of Las Vegasovernight with prices slashed,foreclosures blighting wholestreets and estimates of up tonine out of 10 homeownersunder water.

But now there arewidespread reports of cashhappy investors from themainland and Hong Kongsnapping up property in the city,having decided that their luck isabout to turn.

The question is, are theyplacing a winning bet? At theUniversity of Nevada, globallyrespected economists say theanswer is maybe.

In their latest EconomicOutlook, there are tentative signsof a recovery in the housingmarket, which has beendragging the rest of the localeconomy into deeper mire.

According to figures from thefinancial, property andconsumer information groupCore Logic, two years ago astaggering 70 per cent of Nevadahome owners were in negativeequity.

Today, that figure is just shyof 60 per cent, which is still astark reminder that in any streetin Las Vegas there are morelosers than winners.

But according to ProfessorStephen Brown from the Centerfor Business and EconomicResearch, there are signs that arecovery is under way, althoughhe adds wryly one that only aneconomist could appreciate.

Unemployment levels in thearea are down 0.1per cent, percapita income in Las Vegas isticking up, after years of falls,and, since January, the numbersof condos and single familydwellings available on the

market are slightly down. It alladds up to a small turn in thetide which is encouraginginvestors.

Kristen Routh-Silberman is aLas Vegas luxury and valuehome expert at SynergySotheby’s International Realty.“At Sotheby’s in Las Vegas, wesee more international buyersthan most realty companiesbecause we are a worldwidebrand. The majority of Asianbuyers coming to Las Vegas arefrom Hong Kong, Shanghai andBeijing. We are closing severaltransactions each month with

Asian buyers and the numbersare climbing,” she says.

The city has more directflights to and from China thanany other in the US and thegamblers on the planes areenjoying some pretty reasonablereturns. “There are some greatdeals out there yielding over 15per cent, but they’re harder tofind and also require morecapital. There is, however, aconsistent flow of incomeproperty producing 7 per centminimum returns in Las Vegasat the moment. It won’t alwaysbe like that. But, for now it is.

Asians are savvy buyers; they arefocused on Las Vegas nowbecause it is the right time toinvest,” Kristen says.

Brown says Las Vegascrashed hard during the bustbecause its prices were partiallybased on rising real estate pricesin Los Angeles. Easy credithelped support the residentialreal estate boom which then sawaround 65 per cent wiped offprices during the crash.

Today, that leaves homes inLas Vegas underpriced relativeto construction costs, but to be abuyer seems to mean you have

to have the cash. Brown reportsthat the numbers taking out 30-year or 15-year mortgages inorder to fund a house buy aredown 18 and 21per centrespectively year-on-year.

Las Vegas is seeing visitorvolume approaching levels seenin 2007, when 3.2 million peoplevisited. To hit this target the cityneed only experience a 0.7 percent increase on 2011, which histeam at the Centre of Businessand Economic Research predictwill happen this year. But noteveryone is bullish.

Realtor Leslie Hoke, apassionate smaller businessowner, who offers a personalservice via her company LasVegas Homes by Leslie, warnsthat although there is a recoveryunder way it is slow and fragile.

“There was a bill passed inOctober 2011that suspended allnotice of defaults, the first step inthe foreclosure process. Sincethere have not been filings ofnotice of defaults, there arefewer bank-owned properties onthe market. That is why we arecurrently experiencing a lowsupply,” she says.

“Because the real estatemarket is still on the low end, it’screating more buyer demand. Sonow we have many buyers, notenough houses, multiple offers,generating higher sales prices.Even new home sales arereporting an increase of sales.However, once banks start to filenotice of defaults again, there isspeculation that more bank-owned properties will becomeavailable to the market.”

Asians spinning the wheel

A ‘for sale’ sign in the foreground of houses in the northwest residential neighbourhood in Las Vegas and (below) The Goldrush in northwest. Photos: AFP

Investors take a gamble on recovery in Las Vegas, writes Susie Watkins Polakova

Asians are savvybuyers; they arefocused on LasVegas nowKRISTEN ROUTH-SILBERMAN, SYNERGYSOTHEBY’S INTERNATIONAL REALTY